[Federal Register Volume 63, Number 17 (Tuesday, January 27, 1998)]
[Rules and Regulations]
[Pages 3830-3832]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-1833]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[CC Docket No. 96-45; FCC 97-411]


Universal Service Support Mechanisms

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission authorized the Administrator of the universal 
service support mechanisms to require payment of quarterly 
contributions to universal service in equal monthly installments. This 
action was intended to ease contributor's cash flow problems.

EFFECTIVE DATE: February 26, 1998.

FOR FURTHER INFORMATION CONTACT: Diane Law, (202) 418-7400.

SUPPLEMENTARY INFORMATION:

I. Introduction

    In this Third Order on Reconsideration (Order), we reconsider, on 
our own motion, the Commission's decisions governing the amount of 
money that may be collected during the first six months of 1998 for the 
federal universal service support mechanisms for schools and libraries 
and rural health care providers. We direct the administrator to collect 
only as much as required by demand, but in no event more than $25 
million per quarter for the first and second quarters of 1998 to 
support the rural health care universal service support mechanism. We 
direct the administrator to collect only as much as required by demand, 
but in no event more than $625 million for the first six months of 
1998, to support the schools and libraries universal service support 
mechanism. These actions will reduce the financial burdens on universal 
service contributors without jeopardizing the sufficiency of the 
support mechanisms. The Commission may revise the collection caps if we 
receive evidence of additional demand for services. The rules adopted 
in this Order will become effective February 26, 1998.

II. Background

    1. In the NECA Report and Order (62 FR 41294 (Aug. 1, 1997)), the 
Commission established the administrative structure of the federal 
universal service support mechanisms. The Commission directed the 
National Exchange Carrier Association (NECA) to create an independent 
subsidiary, the Universal Service Administrative Company (USAC), to 
administer temporarily portions of the support mechanisms. The 
Commission also directed NECA to create two independent corporations, 
Schools and Libraries Corporation and Rural Health Care Corporation, to 
administer portions of the schools and libraries and rural health 
support mechanisms. USAC, Schools and Libraries Corporation, and Rural 
Health Care Corporation are required to submit to the Commission 
quarterly projections of demand and administrative expenses for their 
respective support mechanisms.
    2. The schools and libraries and rural health care support 
mechanisms are newly created and have no historical data upon which to 
estimate accurately the demand for services in the initial months of 
the support mechanisms. The Commission specified that the administrator 
should collect $100 million per month for the first three months of 
1998 for the schools and libraries support mechanism and ``adjust 
future contribution assessments quarterly based on its evaluation of 
schools and library demand for funds, within the limits of the spending 
caps. . . .'' The Commission further held that, between January 1, 1998 
and June 30, 1998, the administrator ``will only collect as much as 
required by demand, but in no case more than $1 billion.'' For the 
rural health care support mechanism, the Commission directed the 
administrator to collect $100 million for the first three months of 
1998. In addition, the Commission instituted annual caps on both 
support mechanisms, $2.25 billion for the schools and libraries support 
mechanism and $400 million for the rural health care support mechanism. 
In setting forth a collection schedule, the Commission sought to ensure 
that ``funds will be available as needed while avoiding the potential 
problems arising from the accumulation of large amounts of funds in a 
federal universal service fund.''

III. Discussion

    3. We conclude that we should adjust downward the rate of 
collections for the schools and libraries and rural health care support 
mechanisms during the first six months of 1998. We anticipate that this 
action will not jeopardize the sufficiency of the support mechanisms. 
The annual caps were designed to estimate the maximum, rather than the 
actual, amount of demand for the schools and libraries and rural health 
care universal service support mechanisms. Based on what we have 
learned about the status of preparatory arrangements being made by 
schools, libraries, and rural health care providers to obtain the 
benefit of the universal service support mechanisms, we have no reason 
to believe that demand will reach the maximum projection levels in the 
initial implementation stages of these new support mechanisms. We do 
not want to impose unnecessary financial burdens on service provider 
contributors to universal service by requiring the administrator to 
collect funds that exceed demand. We also wish to ensure the successful 
implementation of the schools and libraries and rural health care 
support mechanisms. Accordingly, we find that it better serves the 
public interest to reduce the collection amounts specified in the Order 
(62 FR 32862 (June 17, 1997)) for the first six months of 1998, as 
described below.
    4. Rural Health Care. The rural health care support mechanism 
supports the

[[Page 3831]]

difference, if any, between the urban and the rural rates for a 
telecommunications service of a bandwidth up to and including 1.544 
Mbps. The rural health care support mechanism also provides limited 
support to health care providers that do not have toll-free access to 
the Internet. In the initial stages of implementing the rural health 
care support mechanism, we anticipate that demand will not exceed $25 
million per quarter during the first six months of 1998. We therefore 
amend our previous decision, and direct the administrator to collect 
only as much as required by demand, but in no event more than $25 
million per quarter for the first and second quarters of 1998 for the 
rural health care universal service support mechanism.
    5. Schools and Libraries. The schools and libraries support 
mechanism provides discounts to eligible schools and libraries for 
commercially available telecommunications services, internal 
connections, and access to the Internet. Because many schools and 
libraries will not begin the installation of internal connections until 
the summer when students are not present in instructional buildings, we 
anticipate that initial demand for the schools and libraries support 
mechanism will not reach projected maximums. We therefore conclude that 
demand from schools and libraries in the second quarter of 1998 is 
unlikely to exceed substantially demand in the first quarter. 
Accordingly, we direct the administrator to collect only as much as 
required by demand, but in no event more than $625 million for the 
first six months of 1998.

IV. Procedural Matters

    6. According to the Administrative Procedure Act, substantive rules 
shall not become effective until 30 days after their publication in the 
Federal Register unless there is good cause to waive that requirement. 
We find that good cause exists to waive the 30-day requirement because 
the rules adopted herein are critical to the expeditious and efficient 
implementation of the new federal universal service support mechanisms. 
The Commission's regulations implementing section 254 will take effect 
January 1, 1998. The rules adopted herein are necessary to calculate 
the first quarter 1998 universal service contribution factors and 
primarily affect the administrator of the support mechanisms. In order 
to collect contributions in February 1998, the administrator must know 
what the contribution factors will be before beginning the billing 
process in January 1998. The rules, therefore, do not place additional 
burdens on the administrator. They enable the administrator to carry 
out its existing responsibilities. In addition, certain carriers must 
file tariffs in December 1997 that reflect the contribution factors. 
Moreover, the rules adopted herein reduce the financial burdens imposed 
on universal service contributors by minimizing the amounts collected 
in the first six months of 1998. Thus, we find that good cause exists 
to make the rules adopted herein effective upon their publication in 
the Federal Register.

V. Supplemental Final Regulatory Flexibility Analysis

    7. As required by section 603 of the Regulatory Flexibility Act 
(RFA), 5 U.S.C. 603, an Initial Regulatory Flexibility Analysis (IRFA) 
was incorporated in the Notice of Proposed Rulemaking and Order 
Establishing Joint Board (NPRM). In addition, the Commission prepared 
an IRFA in connection with the Recommended Decision, seeking written 
public comment on the proposals in the NPRM and Recommended Decision. 
(See 61 FR 63778, 63796). A Final Regulatory Flexibility Analysis 
(FRFA) was included in the Order. The Commission's Supplemental Final 
Regulatory Flexibility Analysis (SFRFA) in this Order conforms to the 
RFA, as amended.

A. Need for and Objectives of This Report and Order and the Rules 
Adopted Herein

    8. The Commission is required by section 254 of the Act, as amended 
by the 1996 Act, to promulgate rules to implement promptly the 
universal service provisions of section 254. On May 8, 1997, the 
Commission adopted rules whose principle goal is to reform our system 
of universal service support mechanisms so that universal service is 
preserved and advanced as markets move toward competition. In this 
Order, we reconsider one aspect of those rules. In order to reduce 
financial burdens on all contributors to universal service, we 
reconsider, on our own motion, the amounts that will be collected 
during the first six months of 1998 for the schools, libraries, and 
rural health care support mechanisms.

B. Summary and Analysis of the Significant Issues Raised by Public 
Comments in Response to the IRFA

    9. Other than those described in the Order, no additional comments 
were filed in response to the IRFAs described above.

C. Description and Estimates of the Number of Small Entities to Which 
the Rules Adopted in This Report and Order will Apply

    10. Because the rules adopted herein apply to the administrator of 
the support mechanisms, the rules will not directly affect small 
entities. It is possible, however, that small entities will indirectly 
be affected by these rules. In the FRFA at paragraphs 890-922 of the 
Order, we described and estimated the number of small entities that 
would be affected by the new universal service rules. The rules adopted 
herein may apply to the same telecommunications carriers and entities 
affected by the universal service rules. We therefore incorporate by 
reference paragraphs 890-922 of the Order.

D. Summary Analysis of the Projected Reporting, Recordkeeping, and 
Other Compliance Requirements and Significant Alternatives and Steps 
Taken to Minimize the Significant Economic Impact on a Substantial 
Number of Small Entities Consistent With Stated Objectives

    11. In the FRFA to the Order, we described the projected reporting, 
recordkeeping, and other compliance requirements and significant 
alternatives and steps taken to minimize significant economic impact on 
a substantial number of small entities consistent with stated 
objectives associated with the Administration section of the Order. 
Because the rules adopted herein may only marginally affect those 
requirements, we incorporate by reference paragraphs 980-981 of the 
Order, which describe those requirements and provide the following 
analysis of the new requirements adopted herein. Under the rules 
adopted herein, the administrator is instructed to collect during the 
first six months of 1998 no more than $625 million for the schools and 
libraries support mechanism and $50 million for the rural health care 
support mechanism.

VI. Ordering Clauses

    12. Accordingly, It is ordered that, pursuant to the authority 
contained in sections 1-4, 201-205, 218-220, 254, 303(r), 403, and 405 
of the Communications Act of 1934, as amended, 47 U.S.C. 151-154, 201-
205, 218-220, 254, 303(r), 403, and 405, section 1.108 of the 
Commission's rules, 47 CFR 1.108, and section 553 of the Administrative 
Procedure Act, 5 U.S.C. 553, part 54 of the Commission's rules, 47 CFR 
part 54, is amended as set forth

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in the rule changes, effective February 26, 1998.

Federal Communications Commission.
Magalie Roman Salas,
Secretary.

Rule Changes

    For the reasons set forth in the preamble, part 54 of title 47 of 
the Code of Federal Regulations is amended as follows:

PART 54--UNIVERSAL SERVICE

    1. The authority citation for part 54 continues to read as follows:

    Authority: 47 USC Secs. 1, 4(i), 201, 205, 214, and 254 unless 
otherwise noted.


Sec. 54.507  Cap.

    2. Section 54.507 is amended by revising the second sentence of 
paragraph (a) to read as follows:
    (a) * * * First, no more than $625 million shall be collected or 
spent for the funding period from January 1, 1998 through June 30, 
1998. * * *
* * * * *


Sec. 54.623  Cap.

    3. Section 54.623 is amended by adding a new sentence at the end of 
paragraph (a) to read as follows:
    (a) * * * No more than $50 million shall be collected or spent for 
the funding period from January 1, 1998 through June 30, 1998.
* * * * *
[FR Doc. 98-1833 Filed 1-26-98; 8:45 am]
BILLING CODE 6712-01-P